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Prepared by Katerina Alexandraki.
For analytical purposes, this paper has used U.S. sources for trade data. These differ from bilateral trade data produced by China largely due to the inclusion of entrepôt trade through Hong Kong into imports from China.
Together, computer equipment, apparel, household goods and toys, furniture, appliances, and television receivers, as well as business, telecommunications, and photographic machinery, have contributed to well over half of China’s gains in U.S. market share over the last five years.
This is illustrated by the fact that the standard deviation of the combined share of Japanese and Chinese imports in the U.S. market was 1.1 as opposed to 3.9 for Japan and 3.3 for China separately.
The calculation is based on nominal as opposed to real trade statistics because deflators for Chinese exports are not available. This would lead to a downward bias in the results if prices of Chinese goods had been growing more slowly than those of U.S. goods and other foreign suppliers. On the other hand, the formula ignores second order interactions which in this case would tend to overstate the impact—approximating for such second-order effects reduces China’s displacement by around $5 billion.
Intra-company trade appears to have accounted only for a small part of U.S. export growth to China. Data provided by the Bureau of Economic Analysis suggest that the share of intra-company sales in total U.S. exports to China has fluctuated between 7 and 14 percent since the mid 1990s. Only in 1999 did exports to affiliates appear to account for 23 percent of total exports to China.
Hufbauer and Rosen (2000) argue that wages in export-oriented industries are, on average, 15 percent higher than those in import-competing industries. Therefore, the jobs created by exports to China may pay higher wages than equivalent import-competing sectors.
Considerable attention in explaining China’s export growth has also been paid to the role of trade barriers and exchange rate policy. For a discussion see, for example, IMF (2004).
China’s average tariff was 12.3 percent in 2002, compared to 23.6 percent in 1996. Some outstanding market access issues, such as the pace of implementation of China’s trade liberalization commitments, or the case against its VAT-rebate policy for semiconductors, are currently being addressed at the WTO.
U.S. exporters have pointed to delays and a lack of transparency in TRQ allocations; delays in the naming of importing enterprises; evidence of discrimination between state and non-state trading enterprises; and the lack of automatic import licensing for these commodities.
Section 306 monitoring implies that the USTR can move directly to the application of trade sanctions against China if there is a slippage in the enforcement of bilateral IPR agreements.
According to the International Intellectual Property Alliance, losses from piracy in China could have exceeded $1.5 billion in recent years (International Intellectual Property Alliance, 2002).
This right was exercised for the first time in December 2003, when quotas were placed on imports of three textile products from China (brassieres, robes, knit fabric), following a determination that market disruption or a threat thereof existed for the domestic textile industry.
Prusa (1996) finds that non-named country imports rise by 22 percent in the first year of trade actions, with more trade diversion in high-duty cases. Two thirds of the AD cases involving China did not involve another country, while China’s status as a “non-market economy” has typically translated into relatively high duties.